Drax Group Plc (LON:DRX) on Tuesday said its EBITDA rose 18% year-on-year in the first half of 2015, helped by higher biomass generation, which acts as protection against the rising cost of the UK carbon tax.
The UK power company's earnings before interest, tax, depreciation and amortisation (EBITDA) grew to GBP 120 million (USD 187.3m/EUR 169.4m), reflecting good operations and an increase in biomass generation to 5.2 TWh, or 37% of net power sales, from 3 TWh, or 23% in the year-ago period.
Drax moved to a pre-tax profit of GBP 53 million from a GBP-11-million loss a year ago and lifted its dividend in line with a policy to distribute 50% of underlying earnings.
Chairman Philip Cox, however, said that the company continued to face challenges with wholesale generation returns due to a low pricing environment and reduction in renewables support. The group repeated its estimates that the UK government's move to end the climate change levy (CCL) exemption for renewables will reduce its EBITDA by GBP 30 million in the second half of 2015 and GBP 60 million in 2016.
"As we move towards completion of our biomass transformation, the Group remains alert to new opportunities for growth and to create incremental shareholder returns. We have begun a strategic review to consider the long term options for the Group," Drax said in its outlook comments.
Drax is converting to biomass three of the six coal-fired power generators at the Drax power station at Derby. It is awaiting EU state aid approval for the early contract for difference (CfD) for the third unit conversion.